The Bank of Korea (BOK) projected that consumption, which rebounded last year, will also move onto an upward trajectory this year. However, it noted that due to structural vulnerabilities such as a semiconductor-centered growth structure and aging, the pace at which the effects of an economic upturn spread to consumption will be slower than in the past.
The Bank of Korea (BOK) analyzed this in a report on the 27th titled "Assessment of the current consumption phase in light of past recoveries and outlook." The Bank of Korea (BOK) divided post-2000 private consumption recoveries into two types: "post-crisis rapid rebound" and "gradual improvement."
The rapid rebound type refers to periods when demand, depressed by external shocks—such as right after the global financial crisis (2009–2011) or after the pandemic (2021–2022)—revived strongly in a short span in tandem with consumption-boosting measures, producing a large rebound but lasting an average of only seven quarters. By contrast, the gradual improvement type refers to periods such as 2004–2008 and 2017–2019, when consumption slowly revived on the back of improved macroeconomic conditions; although the pace was slower, the recovery trend lasted an average of 12 quarters.
The Bank of Korea (BOK) assessed that while consumption trends up to the second half of last year were close to a rapid rebound, they will shift to a gradual improvement starting this year. It cited as grounds the cumulative effects of interest rate cuts, increased semiconductor exports driven by the global artificial intelligence (AI) boom, buoyant stock markets and consumer sentiment, and an expanded government budget based on higher tax revenue. It said these are features commonly observed during past gradual improvement recoveries.
However, the Bank of Korea (BOK) made clear that even if the economy improves, the effect translating into consumption has weakened compared with the past. The information technology (IT) institutional sector, including semiconductors, has limited linkages with other industries and generates little employment, loosening the chain by which strong exports lead to household income growth. Those employed in the semiconductor institutional sector account for only 0.3% of the total, and the fruits of a boom are concentrated among high-income earners. The marginal propensity to consume of high-income earners is 12%, about two-thirds of the overall average (18%), inevitably limiting the consumption spillover effect.
The same goes for rising home prices and stock prices. Higher real estate asset values are accompanied by expanded liability and do not translate into actual spare cash. Stock gains are also highly volatile and their benefits are concentrated among high-income earners, so the consumption-boosting effect is limited. In addition, there was an analysis that demographic shifts and other future-related anxieties are leading households to increase savings rather than open their wallets.
A Bank of Korea (BOK) official said, "As the consumption transmission channel of economic improvement has weakened compared with the past, the pace of increase ahead will be relatively moderate."